Euro rallies against Dollar after Powell's cautious Jackson Hole speech

The euro strengthened against the US dollar on Friday following a speech by Federal Reserve Chair Jerome Powell at the Jackson Hole Economic Symposium, closing the week on a positive note. While Powell acknowledged the potential for an interest rate cut as soon as September, he refrained from making any explicit commitments.

The EUR/USD pair rose to 1.1728, reaching its highest level since 28 July.

Market expectations for a rate cut at the Fed's September meeting (16–17) now stand at 85%. For the remainder of the year, market pricing points to a more dovish outlook, with an average of 54 basis points of easing anticipated, up from 48 basis points previously.

Investor attention is now shifting to labour market data. Powell noted that the market is in an unusual balance, with both demand for and supply of workers slowing. The trajectory of employment will be a key determinant for the Fed's future policy decisions.

An additional factor weighing on the dollar is the growing scrutiny surrounding the Fed's independence. Last week, US President Donald Trump called for the resignation of Federal Reserve Governor Lisa Cook and suggested she could be dismissed. This has further fuelled concerns about political pressure being exerted on the central bank.

Technical analysis: EUR/USD

Four-hour chart

On the H4 chart, the market has formed a consolidation range around the 1.1566 level. Following an upward breakout, the corrective wave appears to have completed at the 1.1742 high. The primary focus is now on the potential initiation of a new bearish wave targeting the 1.1550 level. This scenario is technically supported by the MACD indicator, whose signal line remains below zero and is pointing decisively lower.

One-hour chart

On the H1 chart, the market completed an ascending wave to the 1.1742 level and subsequently formed a consolidation range below it. The price has now broken downwards out of this range. The immediate outlook suggests a high probability of a further decline towards the 1.1664 support level. Following this, a corrective bounce towards 1.1694 is possible. The broader structure is then expected to resume its downward trajectory, targeting 1.1590, with the ultimate bearish objective for the wave structure seen at 1.1550. This view is corroborated by the Stochastic oscillator, whose signal line is currently below the 50 midline and is trending sharply lower towards the 20 level.

Conclusion

While fundamental drivers from the Fed provided a lift, the technical picture suggests the euro's rally may be limited in the near term.